CITY VOTERS APPROVE SAN DIEGO’S PENSION OVERHAUL

Most new city hires would get 401(k)s instead of pensions

What’s next: City labor unions are expected to challenge Proposition B in court. They say it violates state labor law by proposing a pay freeze without good-faith negotiations. The next mayor and City Council will need to craft a 401(k)-style plan for new workers.

A ballot initiative that would replace guaranteed pensions with 401(k)-style plans for most new city hires received overwhelming support Tuesday from San Diego voters who were clearly fed up with the decade-long civic discussion about the city’s pension problems.

Proposition B is viewed by supporters — including Mayor Jerry Sanders and City Council members Carl DeMaio and Kevin Faulconer — as pivotal to moving the city past its fiscal woes that stem, in part, from the decision by previous city leaders to twice increase benefits for workers without identifying a way to pay for them.

Faulconer said the public’s frustration with pensions was obvious given the widespread support.

“I think it shows that it enjoys support from all over the city,” he said. “It cuts across partisanship. It cuts across demographics. People are hungry for reform, and they’re going to get it.”

Labor unions, which strongly opposed the measure, say Proposition B is illegal and will be tossed out by courts. They contend the mayor violated labor law by using his position to advance the initiative and avoid required negotiations with employee unions.

Frank De Clercq, head of the city firefighters union, said the initiative also ignores many of the concessions that workers have made in recent years, including a 6 percent compensation cut and reducing the value of taxpayer-funded health care benefits they receive upon retirement. He said he wasn’t surprised by the results but noted a legal challenge will be made.

“We’re moving forward,” De Clercq said. “It’ll be contested.”

Proposition B, also known as the “Comprehensive Pension Reform” initiative, was crafted by Sanders, DeMaio, Faulconer, the pro-business Lincoln Club and the San Diego County Taxpayers Association. It eliminates pensions in favor of 401(k)s for all new hires except police officers and proposes a five-year freeze to the portion of current workers’ salaries that is used to calculate future pensions.

The city’s independent budget analyst estimated the initiative would save taxpayers about $950 million over 30 years if the freeze is enacted. If not, the measure increases the city’s costs by $13.5 million over the same period.

The freeze is anything but guaranteed — it requires the mayor and council to act — and will almost certainly be challenged in court. One labor union has already filed a complaint with a state agency, alleging the freeze violates the state law that calls for good-faith bargaining.

Councilman Todd Gloria, an opponent of Proposition B, said he understands the frustration over pensions but the initiative is the wrong approach and will up end costing taxpayers more in the long run.

“Unfortunately, in their desire to see some of these reforms, they are passing bad legislation,” he said. “I think this is bad legislation and, in the case of Prop. B, this will be litigated for years and again the bill for that litigation will come out of the taxpayers’ pocket.”

Sanders said the measure has been legally vetted and will withstand scrutiny.

“We’re confident that it was crafted in a way that it’s legal, and naturally the labor unions are going to take that approach because that’s what they have left,” Sanders said.

“I think they need to listen to the message from the voters which says, you know, you need to be on the same type of pension as the rest of America.”

Whether or not the city is able to enact the freeze represents a nearly $1 billion difference to taxpayers.

Supporters of Proposition B — mainly business groups and developers — spent more than $1.8 million on the campaign, most of which went toward a signature drive to put it on the ballot. The financial group owned by U-T San Diego Publisher Douglas F. Manchester gave $25,000.

The main financial opposition comes from labor, which spent $227,000 to dissuade voters.

The city has a nearly $2.2 billion pension deficit as a result of past decisions to increase pension benefits while underfunding the pension plan in 1996 and 2002.

Investment losses exacerbated the problem.

Proposition B doesn’t do anything to eliminate that deficit, but it does take investment risk away from taxpayers and places it on individual employees.